ITAT Ahemdabad in DCIT vs Wockhardt Hospitals Ltd. has held that Where assessee-hospital engaged some doctors on fixed monthly remuneration, and doctors were governed by its service rules, remuneration paid was taxable as 'salaries' and liable for deduction of tax under section 192. In this case the assessee-company was running hospital with branches. It had engaged services of some doctors and was deducting TDS from payments made to them under section 194J. According to the assessee, the doctors were appointed as consultants whose remuneration was liable for TDS under section 194J and there was no employer and employee relationship. The Assessing Officer, however, treated the relationship between the doctors and the assessee as one of employer and employee and held that said payments were liable to TDS under section 192. The Commissioner (Appeals) allowed the assessee's appeal.

On the revenue's appeal it was held as under:

A careful perusal of the appointment order issued to the doctors shows that a fixed monthly amount was paid by the assessee as remuneration and it is in no way concerned with the fees received from the patients treated by them. The appointment letter was issued to the concerned doctor on the basis of his application. The doctors are governed by the service rules of the assessee. Their leave entitlement is also in accordance with the assessee's rules. The doctors were under probation period. During the employment of doctors the assessee has discretion to terminate the same. During the employment the doctors shall devote their whole time attention to their employment. The doctors are liable for retirement on attaining the age of 58 years. During the period of employment, either side will be able to terminate the employment by giving two months' notice in writing or by payment of two months' salary in lieu of such notice to each other. As seen from the appointment order, it can be easily said that the doctors are employees of the assessee and being so, the relation between the assessee and the doctors was that of an employer and employee and the remuneration paid to them in terms of the said appointment order was salary which attracted the provisions of section 192.

More so, in the instant case, the doctors are governed by the service rules of the assessee and it was specifically mentioned in the appointment order that it was a contract for employment and the doctors are liable for retirement on attaining the age of 58 years and the monthly payment is not relating to the number of patients treated by them or the amount charged to the assessee.

As regards the treatment given by the assessee as well as by the doctors to the remuneration paid in their respective books of account, the same is not conclusive to decide the nature of the said remuneration which should be on the basis of relation between the assessee and the doctors and not on any other basis. As per the well-known canon of construction of document, the intention generally prevails over the word used and that such a construction placed on the word in a deed as is most agreeable to the intention of the grantor. If there are grounds appearing from the face of the instrument affording proof of the real intention of the parties, then that intention would prevail against the obvious and ordinary meaning of the words used. The real intention of the parties, as already discussed with reference to the terms of the appointment letter issued to the doctors in the light of service regulations of the assessee hospital, was to have an employer and employee relationship between them and it was not a case of appointment of consultants. In view of this, there was an employer and employee relationship between the assessee and the doctors. Consequently, the remuneration paid to them was chargeable to tax under the head 'salaries' and liable for deduction of tax under section 192 and not under the provisions of section 194J. Wherever the assessee issued appointment letter in the manner prescribed above and the doctors' appointment is governed by the service rules of the assessee-hospital, it is to be considered that the relationship between the doctors and the assessee is as employee-employer relationship and the assessee is liable to deduct TDS under section 192.

Chandra Poojari, Accountant Member - The above two appeals by the Revenue are directed against the separate orders of the CIT(A)-II, Hyderabad dated 29.3.2011 for assessment years 2007-08 and 2009-10. Since common issues are involved in these appeals, they are clubbed together, heard together and are being disposed of by this common order for the sake of convenience.

1. The Revenue raised the following grounds of appeal:

1. The learned CIT(A) erred on facts and in law in allowing the appeal.

2. The learned CIT(A) erred in holding that the Assessing Officer was not justified in treating the assessee as 'assessee in default' in terms of section 201(1)/201(IA) of the Income-tax Act, 1961.

3. The learned CIT(A) erred in holding that the relationship between the assessee-deductor and the doctors is not that of an employer and employee.

4. The learned CIT(A) failed to appreciate that the relationship between the assessee-deductor and the doctors is that of 'employer and employee'.

5. The learned CIT(A) failed to appreciate the fact that there is no material on record to show that the doctors in question have filed their returns of income admitting the amounts in question for the year under consideration.

6. The learned CIT(A) failed to appreciate the fact that the Supreme Court's decision in the case of Hindustan Coca Cola Beverages Pvt. Ltd. (293 ITR 226) would not apply to the assessee's case in view of the fact that the assessee has not been deducting tax at source under section 192 continuously for all the years whereby the provisions of Chapter XVII-B of the Income-tax Act, 1961 would be redundant.

2. The facts of the case are that the assessee company is running a hospital in the name & style as Kamineni Wockhardt Hospitals with branches at King. Koti and L.B. Nagar. In both the branches, the company engaged the services of doctors. In order to verify its compliance towards TDS provisions, a survey was conducted in the assessee's case on 8.1.2008. During the course of survey, it was noticed that the assessee had engaged the services of some doctors and had been making TDS on the payments made to them u/s. 194J instead of u/s. 192 of the Act by treating the doctors as Consultants.

3. The assessee has categorized the doctors into two parts. The first category of doctors is Full Time Consultants or Retainers (FTCRs in short) and the other one is Honorary Consultants (HCs in short). In respect of FTCRs the doctors are assured of a fixed minimum guarantee monthly amount and in respect of the HCs payment is made on service basis. However, the assessee is making TDS on the payments made to the doctors of both categories u/s. 194J of the Act. In other words, the assessee is not deducting TDS on the payments made to FTCRs as per the provisions of Sec. 192 of the Act. The assessee pleaded before the lower authorities that Retainership Appointment letter dated 25.6.2005, shows the following facts:

(a) They shall act exclusively for Wockhardt as consultants and shall not render similar services directly or indirectly to any person, firm, company, institution and health care engaged in similar business and providing similar services in India without prior written permission of the company.

(b) The association is effected for an initial period of five years and further renewable on mutual agreement.

(c) They are required to deliver services in accordance with the specified protocols and process and quality standards of the hospital.

(d) In consideration of the above, they are offered an all inclusive remuneration per month.

(e) After two years apart from the remuneration fee, they will be eligible for 50% of the professional charges or in excess of the remuneration fee.

(f) They shall observe and follow all hospital protocol rules and regulations and code of conduct as prescribed by Wockhardt Hospital from time to time.

4. On these facts, the Assessing Officer proposed to the assessee to treat the relationship between the doctor and the hospital as one of employer and employee for the purpose of TDS provisions. In response to the same, the assessee vide its letter dated 5.1.2010 submitted before the Assessing Officer as under:

1. There is no specific job assignment given to the professionals in the manner in which the professions shall render his services.

2. No specific working at specific times for consultation as per their convenience.

3. These professionals are not eligible for provident fund, gratuity and bonus.

4. Their attendance to hospitals is not enforced.

5. The payment terms to the professionals are through a structured fee, which assures some fixed sum initially and is enhanced according to the extent of income he generates to the hospitals.

6. Doctors, who applied, were allowed to have their own private practice or allowed to work for different hospitals of their choice.

5. Further the terms of contract and the actual working reflects the following:

(a) Employees are eligible for PF whereas consultants are not eligible for the said benefit.

(b) Employees are eligible for gratuity as per Gratuity Act whereas consultants are not eligible for the said benefit.

(c) Employees are eligible for bonus/variable pay whereas consultants are not eligible for such payment.

(d) Medical insurance is provided to all employees whereas consultants are not provided with such facility.

(e) Professional tax as applicable is deducted from employee's salary and remitted to the State Govt. whereas no such deduction is made from consultant's payments.

(f) Performance appraisal of the employees is made by concerned head of the department annually, whereas no such evaluation is done for consultants.

(g) All employees are eligible for 30 days paid leave per annum whereas no such leave facilities are available for consultants.

(h) All employees have to record their in/out time while coming into/going out of office/hospital. No such requirement is there for consultants.

(i) Working hours for employees are 8 hours a day with one day off per week whereas no such working hours and off facilities is available for consultants.

(j) Employees have got allowances for mobile phone/medical reimbursement etc., whereas no such facilities are available for consultants and have to meet such expenses by themselves.

(k) In case of employees all applicable labour laws are applied whereas such laws are not applicable to consultants.

(l) Age criteria for admission and retirement are applicable to employees whereas no such restriction is applicable to consultants.

(m) Termination notice period/notice pay are applicable in or employees whereas no such specification for consultants.

(n) In case of medico legal cases, consultants have to bear expenditure in defending themselves whereas employees will be defended at company's cost.

6. The assessee filed another letter before the Assessing Officer on 22-02-2010, the gist of which is as under:

"In continuation of hearing held on 08.01.2010 and our letter dated 12.12.2010 in connection with proceedings in our case regarding TDS from fees paid to doctors during A.Y. 2007-08, we wish to draw your kind attention to similar proceedings in A.Y. 2008-09 during the curse of which we have filed confirmation letters from various doctors in the effect, that for A.Y. 2007-08 also, the doctors have filed their returns of income and paid taxes due thereon. We are herewith enclosing copies of the said letters for your ready reference. We therefore request to drop the proceedings for the A.Y. 2007-08. We regret that we could not furnish this information earlier due to closing of our office in Hyderabad and change in personnel handling the matter."

7. After considering the assessee's explanation, the Assessing Officer rejected the assessee's contention and held the payments made by the hospital to the doctors as salary u/s 192 and treated the assessee as the assessee in default u/s 201(1) insofar as the short deduction in computation between the amounts treated as salary and professional fees and completed the assessment relying on the following decisions:

8. The CIT(A) considering the argument of the assessee's counsel allowed the appeal of the assessee while placing reliance on the order of the Tribunal in the case of Dy. CIT v. Yashoda Super Speciality Hospital [2010] 133 TTJ 17/[2011] 44 SOT 87 (Hyd.)(URO) wherein it was held that assessee hospital having engaged the services of doctors on the basis of agreements whereby the doctors are free to treat the patients at the hospital at their own discretion and time, without any supervision and control of the assessee and they are not on the pay roll of PF payments, there is no element of employer and employee relationship and therefore, the doctors are to be treated as consultants and tax has to be deducted under section 194J from payments made to them and not under section 192. Aggrieved, the Revenue is in appeal before us.

9. The learned DR submitted that the assessee company is running a hospital in the name and style of Kamineni Wockhardt at Koti and L.B. Nagar, Hyderabad. In Both these hospitals, the company has engaged services of Doctors but was found not complied with the provisions of TDS correctly. The remuneration paid to the Doctors has been subjected to section 192 but not section 194J of the I.T. Act. Accordingly, the Assessing Officer passed the order u/s. 201(1) and 201(1A) of the Act by treating the assessee as an assessee in default. The assessee deductor is engaging Doctors under two categories (1) Full time Consultants and Honorary Consultants. The assessee hospital has entered into an agreement with each one of the full time consultants and he drew our attention to a copy of agreement which is placed on record in the Paper Book. He submitted that the Assessing Officer has brought out certain facts from the agreements signed with these Doctors as below:-

(a) The doctors shall act exclusively for Wockhardt Hospitals as consultants in concerned specialty and shall not render similar services directly or indirectly to any person, firm, company, institution or any healthcare facility engaged in similar business and providing similar services in India or elsewhere unless specifically permitted to do so with the prior written permission of the company (emphasis supplied).

(b) The association is effective for an initial period of five years and further renewable for another five years on mutually agreed upon terms and conditions after the expiry of the first five years. However, either party cannot terminate this relationship arrangement during the period of five years.

(c) The assessee and the doctors will mutually work towards creating an effective delivery of (professional) services. The doctors will be required to carry out the services productively and efficiently, in accordance with the specified protocols, processes and quality standards of the hospital (emphasis supplied).

(d) In consideration of the above, the doctors are offered an all inclusive remuneration fee of Rs. 1,75,000/- per month from the assessee during the tenure of the first five years.

(e) However, after two years apart from Rs. 1,75,000/- as remuneration fee per month, the doctors will also be eligible for 50% of the professional charges earned in excess of the remuneration fees. Professional charges is defined as the doctors charges, charged by the assessee to patients and invasive consultation charges.

(f) The doctors shall observe and follow all hospital protocol rules regulations and code of conduct as prescribed by the assessee from time to time (emphasis supplied).

10. The DR further submitted that the terms and conditions mentioned above are similar to those in the case of other full time consultant doctors. As seen from the terms of the above mentioned retainer ship appointments/ arrangement letters, it is clear that the "Full time consultant doctors" are governed by the rules and. regulations of the assessee. They are paid a monthly remuneration. This type of arrangement gives rise to "Employer and Employee" relationship. Since the relationship between the assessee and the "Full time consultant doctors" is that of "Employer and employee", the assessee is required to deduct tax u/s. 192 instead of u/s. 194J on the payments made to them. As the assessee has been deducting tax at source u/s. 194J, it is to be treated as "an assessee in default" as per the provisions of section 201(1) r.w.s. 192 of the Income Tax Act, 1961.

11. The DR submitted that the Assessing Officer has also found contradictions in the written submission filed before him on 05- 01-2010 as extracted below.

i. There is no specific job assignment given to the professional(s) in the manner in which the professional(s) shall tender his services.

ii. No specific working hours are prescribed to the professionals. They are available to the hospital at specific times for consultation as per their convenience.

iii. These professionals are not eligible for leave, provident fund, gratuity and bonus.

iv. Their attendance to hospitals is not enforced.

v. The payment terms to the professionals are through a structured fee, which assures some fixed sum initially and is enhanced according to the extent of income he generates to the hospital.

vi. Doctors, who applied, were allowed have their own private practice or allowed to work for different hospitals of their choice.

12. The learned DR submitted that in point (ii) the contradiction is very visible and clear as in the first sentence no specific working hours are prescribed by the professionals but in the second sentence they are available at hospitals at specific times for consultations. In reality also it is a fact that all these consultant professionals are available at specific times in the hospitals for consultation by the patients who come to their OP Chambers and also the consultant have to attend to the in-patients admitted to the hospitals. Hence clause (ii) & clause (iv) are also contradictory to clause (i) and that become irrelevant. When the clause (ii) says the consultants are to be available at specific times, the assessee is trying to mislead by clause (i) & (iv).

13. The DR submitted that in point (iii) of assessee's written submissions before the AO an emphasis has been placed on not extending the facilities of Leave, PF, Gratuity, Bonus etc., and hence the contract is not an employment. However, all these benefits which are categorized as perquisites under the Income Tax Act are individual components governed by separate Statutes making the employer to fulfil these statutory conditions "on demand by the employee". Merely because the employee does not demand especially when a substantial remuneration is paid mostly per month or per annum, the emphasis on absence of such things becomes irrelevant. There are many types of employments which are vogue without the above benefits to the employees such as temporary employees. Even Gratuity is payable to employees in the Government only after completing a minimum period of 20 years, and thus and lack of Gratuity payment before 20 years does not take back the character of contract as employee.

14. The DR submitted that in clause (vi) it has been mentioned that Doctors who applied, were allowed to have their own private practice or allowed to work for different hospitals of their choice. In this regard, the assessee has furnished evidence of permission to practice some Doctors before the CIT(A). However, the Assessing Officer has not been privileged to such piece of evidence either during the original proceedings or by virtue of Rule 46A(3). Hence this piece of evidence relied upon by the CIT(A) is not adjudicated as per the provisions of Rule 46A(3). The Assessing Officer has also taken reference to page 1143 of the commentary by Chaturvedi and Pithisaria:

"It is held in a large number of cases that "the nature of extent of control which is requisite to establish the relationship of employer and the employee must necessarily vary from business to business and is by its very nature incapable of precise definition. It is not necessary for holding that a person is an employee, that the employer should be proved to have exercised control over his work, that the test of control was not one of universal application and that there were many contracts in which the master could not control the manner in which the work was done". Therefore, it follows that the factor of freedom is not the only guiding factor to decide the nature of relationship between the hospital and the doctors".

15. The DR further relied upon the ratios laid down in the case of St. Stephens Hospital (supra) and Max Mueller Bhavan, In re (supra) and Justice Deoki Nandan Agarwala (supra). Relying on these decisions, it is submitted that the payments made would fall within the purview of Section 192 of the I.T. Act, thereby it is to be treated as the assessee in default u/s. 201(1) and interest to be levied u/s. 201(1A). According to the DR, the short deduction has been worked out as below:

A.Y.

Short deduction (Rs.)

Interest u/s. 201(1 A)

Total (Rs.)

2007-08

1,13,86,339

40,99,082

1,54,85,421

2008-09

95,96,602

3,83,864

99,80,466

2009-10

85,39,064

10,24,688

95,63,752

16. He submitted that while adjudicating on the issue whether there is any employer or employee relationship between consultant Doctors and the assessee hospital, the CIT(Appeals) has decided the issue between the professionals and the assessee is not that of employee and employer relationship but that of clearly professional consultants working under contract for rendering professional services. However, for arriving at this conclusion, the CIT (Appeals) merely extracted the gist of submissions made by the assessee hospital before the Assessing Officer on 05.01.2010 which has already been discussed above as running full of contradictions. Moreover, the CIT(Appeals), point (vi) of terms of service between the Doctors and appellant hospital at Page No. 10 has given a finding that some senior Doctors were allowed to have their own private practice or worked for different hospitals of their choice. He submitted that for such a stand, necessary evidence was not placed before the Assessing Officer. Thus, this amounts to admitting additional evidence by the CIT (Appeals) without following the obligatory opportunity extended to the Assessing Officer under Rule 46A(3). The order of the CIT (Appeals) is also incomplete in not giving a clear cut finding as to whether the relationship between consultants and hospital is that of employer and employee or otherwise but instead the CIT (Appeals) has diverted the matter to the decision of Apex Court in Hindustan Coco-cola Beverages (P.) Ltd. v. CIT [2007] 293 ITR 226/163 Taxman 355 .

17. According to the learned DR the order of the CIT (Appeals) is bad in law for not giving a clear cut finding as arising from the submissions furnished before him but merely accepted the submissions of the assessee without going into the merits or calling out the relevant facts. In the process, he has also admitted additional evidence without giving opportunity to the Assessing Officer. Hence, the order of the CIT(Appeals) for the asst. year 2008-09 is not only incomplete but bad in law. In the light of this, it is incorrect for the successor CIT(Appeals) for the asst. years 2007-08 and 2009-10 to have followed the orders of the predecessor very blindly. The Black's Law Dictionary defines employment and employee as below:-

"As the word employment is not defined under the Act, reference may be permitted to be drawn on general principles.

"Employment is a contract between two potties, one being the employer and the other being the employee. An employee may be defined as:

"A person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed".

18. The DR submitted that the concept or phrase employment is also undergoing dramatic changes in the world scenario in order to bring in better employee-engagement and productivity and also move away from rule based management to objective based management. The work conditions are being determined as per the convenience of both the parties, i.e. management and workers to minimize the complications and maximize the organizational goals. In the instant case, the assessee company has entered into an agreement with the Doctors. The clauses of the agreement clearly stipulate that the Doctors shall follow rules, regulations, protocols and code of conduct of the assessee hospital as brought out by the Assessing Officer in Page No. 2 of the assessment order. From this, it is very clear that the consultant Doctors are under obligation of rules, regulations, protocols and code of conduct as prescribed by the assessee hospital from time to time. This clearly establishes that this is a case of employment contract only, as coupled with exclusivity clause, this brings in a spectre of tying the doctors to the employer discipline of the assessee hospital. It may also be pertinent to reiterate here that all these Doctors under these contracts are seen to be visiting the hospital, occupying their respective chambers and attending to the patients on a particular time frame. They are to be present to cater to the needs of the hospital as well as patients. Hence, it is not correct to say that the Doctors do not come on specific hours. If the services of the Doctors are not made available for specific hours, the huge remuneration paid to them is charity. However, absence of such perquisites do not categorize the consultant Doctors or does it take away core of employment as the contract signed bind the doctors to rules, regulations, protocol and code of conduct. Further, if a few Doctors are permitted to undertake or setup private practice on their own, this does not take central character of exclusivity in employment as laid down in the clauses of agreement. He submitted that reference may be taken to the service conditions of Doctors working in Govt. Hospitals who are allowed to setup their private practice outside the hospital hours. If a few Doctors are permitted to setup private practice outside the clause of exclusivity, this does not alter the nature of contract.

19. The DR submitted that in the case of St. Stephen's Hospital (supra), the key factor pointed out by the Tribunal for determining the nature of the contract is as emerging from the clauses of the contract. The relevant extract of the head note of the contract is given here. Thus, the under lying implication of the agreement is material factor for determining the nature of the contract. Similar ratio has been followed in the cases of Max Mueller Bhavan and Justice Deoki Nandan Agarwala cited supra. In this given cases in appeal, the clauses of the agreement are clearly pointing to control over Doctors time, discipline, attendance etc. inferring that there is a contract of service. Hence, this case shall be read with the ratio laid down in the case of St. Stephens Hospital (supra). The ratio laid down in Yashoda Hospital is not applicable to this case as terms of agreement and contract are entirely different as seen from this case. Moreover, there is a misleading attempt to distort the facts. In the case of Yashoda Super Speciality Hospital (supra), it is mentioned that the Doctors are only to follow the code of conduct enunciated by the Medical Council of India. This is far from truth. Medical Council of India prescribes code of conduct only for the ethics to be followed in medical practice; they do not enter the realm of employment or contracts entered into by the Doctors. Thus, emphasis on this is wrongly placed, with an intention to mislead. Thus, the order of the CIT(Appeals) be quashed and the order of the Assessing Officer be restored.

20. On the other hand, the learned AR relied on the order of the Tribunal in the case of Yashoda Super Speciality Hospital (supra) and also on the order of the CIT(A).

21. We have heard both the parties and perused the material on record. We have carefully gone through the copy of the proforma appointment letter entered by the assessee with the employee which reads as follows:

"Proforma of appointment letter of employees only

Date:

Dear

This has reference to your application for employment in our Company. We are pleased to appoint you as ...... in the ........ as Trainee at our Hyderabad Hospital, with effect from .......... on the following terms and conditions

1. Your remuneration will be as per the Annexure dated ........ which forms part of this appointment letter.

2. Payment of all the above remuneration will be subject to policies, rules and regulations of the Company, as applicable from time to time.

3. Your remuneration is confidential between you and the Company and you are obliged to maintain absolute secrecy of the terms and conditions of your employment.

4. Your leave entitlement will be in accordance with the Company rules applicable from time to time.

5. You shall abide and be bound by the establishment's Service Rules, as these Service Rules shall form part of this contract of employment. You will also carry out and abide by any instruction, House Rules and Office Orders issued by the Management from time to time. Your appointment and continuation in service is subject to satisfactory verification of our credentials, testimonials, etc., and not having concealed any material information from us or having given false particulars in your application.

6. You will be on probation for a period of Twelve Months from the date of your appointment which if deemed necessary may be extended. During the period of probation, either side will be entitled to terminate the employment relationship without assigning any reason, by giving one month's notice in writing or by payment of one month's salary in lieu of such notice to other side. On successful completion of your probation period, you shall be eligible for confirmation in the service of the Company and the same shall be communicated in writing to you. In case you do not receive this written communication, your status shall remain that of a probationer. Post confirmation, either side will be able to terminate the employment by giving two months notice in writing or by payment of two months salary in lieu of such notice to each other.

7. If not already proficient, you shall strive to achieve proficiency in the use of computers within the first 3 months of the commencement of your employment with the Company to the level decided as necessary by the Company for working in the Hospital. The Company will offer training, assistance and guidance as deemed necessary to enable you acquire this proficiency and you shall make all effort on your part. On testing after 3 months of service, if your level of computer proficiency is found to be lower than the norm then the Company shall have the right to take any action as deemed appropriate, including discontinuance of services.

8. During your employment with the Company, the Company may, at any time, at its sole discretion station you in any other location in India. The Company shall also be entitled at any time to transfer you to any of its Affiliates, Subsidiaries or Sister Companies with or without any changes to the terms and conditions and you shall comply with all directions and instructions in that regard.

9. You will keep the Management informed of any change in your residential address. In case of your inability to do so, any communication sent at the address available with the Management will be deemed to have been served on you.

10. You shall devote your whole time and attention to your employment with the company and shall discharge your duties such that you undertake not to engage yourself directly or indirectly with, or without remuneration in any other employment, service or calling of any nature whatsoever without written permission from the Company.

11. You will not at any time without the consent in writing of the Company during the term of your service with the Company or after the termination of service by notice, discharge or otherwise, make known or divulge in any manner whatsoever any information which, while in the service of the Company you have acquired as secret information concerning the technical processes, patents, transactions, finances or affairs of the Company. In addition, you shall be bound by the decision of the Company in regard to publications written or otherwise, of any work with which you may be associated. It is, however, mutually agreed that this undertaking shall in no way affect your right to make use of the general knowledge and skill, which you have acquired in the service of the Company.

12. If you or your dependant family members currently and during the tenure of employment have a financial/gainful interest in any business with WOCKHARDT GROUP OF COMPANIES, then it would be obligatory on your part to make a written declaration to this effect to the Management. In future, if you or your dependent family members enter into any such business, the same may be informed immediately to the Company.

13. If at any time you shall, by your conduct, render yourself incompetent to perform your duties or if you should be dishonest, disobedient, intemperate, irregular in attendance, commit, any act subversive of discipline and good conduct or an act unbecoming of an employee, any breach of the terms of your appointment or any of its stipulations herein contained, the Company shall, without prejudice to any of its rights under the terms herein be entitled to terminate your employment forthwith without notice or payment in lieu of notice and to deduct from your salary or other emoluments (if any) then due to you, the amount of any loss the Company may have sustained.

14. This appointment is subject to you being found medically fit by our Medical Consultant in the Company's medical examination. You can also be subjected to the Company's medical examination by our Medical Consultant from time to time during the course of your employment and the continuance of your appointment shall be subject to your being medically fit.

15. The date of birth entered by you in the service records of the Company at the commencement of your employment will be binding and conclusive and you will not be entitled to raise any dispute later on the date of birth so recorded so as to seek continuation in service or for monetary benefits.

16. It is a condition of your employment with the Company that you will retire from the services of the Company on attaining the age of 58 years, without notices whatsoever from the company in this regard.

17. Upon leaving the employment of the Company, you shall not take with you any properties, formulae, drawing, blue print or other reproduction or any other data, tables, calculations, letters or other documents of any other writing or copy of writing of any nature whatsoever pertaining to the business of the Company. You shall also not retain any copies or reproduction of any documents in physical, electronic or any format relating to the affairs of the Company.

18. It is agreed that it snail be open to the Company from time to time, to add and/or to modify any remuneration, benefit, facility, or perquisite that may have been extended to you, on a review of the Company's functioning, finances and prospects and your performance and that you shall be bound by the Company's decision in this regard.

19. On ceasing to be in the employment of the Company you shall return forthwith all the properties of the Company that are entrusted at the time of employment and/or during the course of employment with the Company.

20. Any cause of action for the dispute arising out of the Contract of Employment between the Company and the Employee shall lie in the Court of Mumbai City only.

21. If at any time, it is realized that the particulars, testimonials and the information furnished by you at the time of your selection and appointment are false; your services will be liable to be terminated on that count.

You are requested to please signify your acceptance of the terms and conditions hereinabove by signing and returning to us the duplicate copy of this letter.

We look forward to a long and mutually beneficial association.

Yours cordially,

for Wockhardt Hospitals Limited,

GENERAL MANAGER.

I accept the above terms and conditions,

Signature: ________ Date: ________ "

22. We have also carefully gone through the offer letter issued to Dr. Shailender Singh which is as under:

"25.06.2005

Dr. Shailender Singh

H.No. 6-3-668/10/16

Durganagar Colony, Punjagutta

Hyderabad

Dear Dr. Shailender Singh,

Further to our discussions, we take great pleasure in offering you as Consultant for the Cardiology services with Wockhardt Hospitals in Hyderabad on retainership basis.

The terms of retainership are as follows:

1. You shall act exclusively for Wockhardt Hospitals as Consultant in Cardiology and shall not render similar services directly or indirectly to any person, firm, Company, Institution or any healthcare facility engaged in similar business and providing similar services in India or elsewhere unless specifically permitted to do so with the prior-Written permission of the Company.

2. This association is effective for an initial period of 5 (Five) years and further renewable for another 5 (Five) years on mutually agreed upon terms and conditions after the expiry of the first 5 (Five) years. However, either parties cannot terminate this retainership arrangement during the period of first 5 (Five) years.

3. Wockhardt Hospitals and you will mutually work towards creating an effective delivery of Cardiology services. You will be required to carry out the same productively and efficiently, in accordance with the specified protocols, processes and quality standards of the hospital.

4. In consideration of the above, we offer you an all-inclusive remuneration fee of Rs. 7,25,000/- (Rupees seven lacs and twenty five thousand only) per month from Wockhardt Hospitals during the tenure of first 5 (Five) years.

5. However, after two years apart from Rs. 7,25,000/- (Rupees seven lacs and twenty five thousand only) as remuneration fee per month you will be also eligible for 50% of the professional charges earned in excess of the remuneration fees. Professional charges is defined as your charges charged by Wockhardt Hospitals to patients towards inpatient and outpatient consultation, Non-invasive consultation charges and Invasive consultation Charges.

6. It is agreed between the parties that the above remuneration is independent and mutually exclusive of the cost that Wockhardt Hospitals may charge for its services.

7. You acknowledge the fact that Wockhardt Hospitals have an excellent reputation and corporate image recognised widely by the medical profession as well as the public at large and shall not adversely do or caused to be done any act or omission which shall affect the reputation or corporate image of Worckhardt Hospital.

8. You agree and undertake not to disclose any information relating to Wockhardt Hospital or its businesses or any of its scientific, medicinal, clinical or any other information which Wockhardt Hospital treats as confidential and keep, in all respect, such matter secret which may come to your knowledge or be made available to you during the subsistence of this retainership.

9. Retainership terms for you are strictly confidential between Wockhardt Hospitals and you and you are requested not to let any breach of the same to occur.

10. You shall also not disclose, use, disseminate or publish any technical, clinical and commercial information with which you become acquainted or of which you become aware during the course of this retainership or use the same in any public forum including seminars/conferences without the prior written consent of Wockhardt Hospitals.

11. You shall observe and follow all hospital protocols, rules, regulations and code of conduct as prescribed by Wockhardt Hospitals from time to time.

12. Upon termination of this retainership arrangement, you shall return. to Wockhardt Hospital the property, assets, tools, equipments and materials entrusted to you or in your possession at the time of such termination. You shall also not retain any copies or reproduction of any documents in physical, electronic, or any format relating to the affairs of Wockhardt Hospital.

13. This arrangement shall not give rise to any relationship of employer and employee between Wockhardt Hospital and you and this engagement is solely on retainership basis for execution of specific responsibilities as stipulated herein and as mutually discussed and agreed from time to time.

14. Any notice required by this retainership arrangement to be given by, any party to another shall be in writing and served by registered post A/D to the last known address of the other party.

15. In case of disputes or differences arising out to this retainership arrangement, the competent courts at Mumbai only shall have exclusive jurisdiction to try and entertain the case.

16. A detailed legal agreement will be entered upon between both the parties incorporating the above terms and conditions and on the mutually agreed conditions at a later date.

Kindly sign the duplicate copy of this letter as a token of your acceptance of the above retainership arrangement.

Thanking you and looking forward to a long and mutually beneficial association.

Yours sincerely,

Sd/-

Vishal Bali

Vice President (Operations)

I accept the above terms and conditions

Sd/-

Dr. Shailender Singh"

23. The learned AR submitted that the doctors are consultants and whose remuneration is liable for TDS u/s 194J of the IT Act and there is no employer and employee relationship. The assessee has no intention to employ the doctors on salary basis. Further, he submitted that the recipients of remuneration from the assessee are assessed to tax individually and they have already paid the tax in their respective hands and there is a clear findings by CIT(A) on this issue. He relied on the judgment of Supreme Court in the case of Hindustan Coca Cola Beverages (P.) Ltd. (supra).

24. A careful perusal of the appointment order issued to the doctor shows that a fixed monthly amount was paid by the assessee as remuneration and it is no way concerned with the fees received from the patients treated by them. The appointment letter was issued to the concerned doctor on the basis of their application. The doctors are governed by the service rules of the assessee. Their leave entitlement is also in accordance with the assessee's rules. The doctors were under probation period. During the employment of doctors the assessee has discretion to terminate the same. During the employment the doctors shall devote their whole time attention to their employment. The doctors are liable for retirement on attaining the age of 58 years. During the period of employment either side will be able to terminate the employment by giving two months notice in writing or by payment of two months' salary in lieu of such notice to each other. As seen from the appointment order it can be easily said that the doctors are employees of the assessee and being so, the relation between the assessee and the doctor was that of an employer and employee and the remuneration paid to them in terms of the said appointment order was salary which attracted the provisions of section 192 of the Act.

25. Before us the learned AR relied on various case-law in support his contention to show that there was no employer and employee relationship between the assessee and the doctors and the remuneration paid by the assessee to the said doctor was not "salary" attracting the provisions of section 192. In our opinion, the various case law relied on by the assessee's counsel are on the facts of those cases and on consideration of facts of the present case, in our opinion, those case-law cannot be applied to the case of the assessee. More so, in the present case the doctors are governed by the service rules of the assessee and it was specifically mentioned in the appointment order that it was a contract for employment and the doctors are liable for retirement on attaining the age of 58 years and the monthly payment is not relating to the number of patients treated by them or the amount charged to the assessee.

26. As regards the treatment given by the assessee as well as by the doctors to the remuneration paid in their respective books of account, we are of the opinion that the same is not conclusive to decide the nature of the said remuneration which, as already observed by us on the basis of relation between the assessee and the doctors and not on any other basis. As per the well known cannon of construction of document, the intention generally prevails over the word used and that such a construction placed on the word in a deed as is most agreeable to the intention of the grantor. If there are grounds appearing from the face of the instrument affording proof of the real intention of the parties, then that intention would prevail against the obvious and ordinary meaning of the words used. In our opinion, the real intention of the parties herein as already discussed with reference to the terms of the appointment letter issued to the doctors in the light of service regulations of the assessee hospital was to have an employer and employee relationship between them and it was not a case of appointment of consultants. In view of this, in our opinion, there was an employer and employee relationship between the assessee and the doctors. Consequently, the remuneration paid to them was chargeable to tax under the head 'salaries' and liable for deduction of tax u/s. 192 of the Act and not under the provisions of section 194J of the Act. However, we make it clear that wherever the assessee issued appointment letter in the manner prescribed above and the doctor's appointment is governed by the service rules of the assessee hospital, it is to be considered that the relationship between the doctors and the assessee is as employee-employer relationship and the assessee is liable to deduct TDS u/s. 192 of the Act.

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